The company doesn't have a license from copyright holders to record or transmit those programs; a fact not lost on the broadcasters that rely on fees to stay afloat. The broadcasters sued Aereo for copyright infringement, but the Second Circuit Court of Appeals ruled in a 2-1 decision on Monday that Aereo is okay because its tiny antenna business model conforms to the circuit's ruling in Cartoon Network v. CSC Holdings.

The Second Circuit explained "From its subscribers' perspective, Aereo functions much like a television with a remote Digital Video Recorder (DVR) and Slingbox. Behind the scenes, Aereo's system uses antennas and a remote hard drive to create individual copies of the programs Aereo users wish to watch while they are being broadcast or at a later time. These copies are used to transmit the program to the Aereo subscriber."

Since the transmission of a broadcast TV program through an individual's rooftop antenna is private, the court concluded there was "no reason why the result should be any different when that rooftop antenna is rented from Aereo and its signals transmitted over the Internet" as long as only one person could receive that antenna's transmissions.

Key to that ruling was Cablevision's decision to create a separate copy of recorded TV programs for each user ... Because each copy was viewed by only one household, the court ruled that Cablevision was not engaged in a "public performance" of copyrighted works ... In Aereo's server rooms are row after row of tiny antennas mounted on circuit boards. When a user wants to view or record a television program, Aereo assigns him an antenna exclusively for his own use. And like Cablevision, when 1000 users record the same program, Aereo creates 1,000 redundant copies.

Judge Denny Chin doesn't think that the tiny antennas make a difference. He wrote in his dissent, "The system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law."

Aereo is currently limited to New York City subscribers, but Aereo-backer Barry Diller (a.k.a. Mr. Diane von Furstenberg) told The New York Times that the company will begin expanding in light of its victory. That move could also benefit the broadcasters. Federal courts outside the Second Circuit are not bound by Monday's ruling, so the broadcasters could potentially create a circuit split by challenging the Aereo business model as the company expands. If the broadcasters can force a split, both parties would petition the Supreme Court for a resolution.

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U.S. Second Circuit features features news and information from the U.S. Court of Appeals for the Second Circuit, which hears appeals from U.S. District Courts in Connecticut, New York and Vermont. This blog also features news that would be of interest to legal professionals practicing in the 2nd Circuit. Have a comment or tip? Write to us.